Aussie budget closes condensate tax loophole
This week's Australian federal budget has closed a tax loophole, ending an excise exemption worth more than $500,000 on the production of condensate.
MELBOURNE, May 14 -- This week's Australian federal budget has closed a tax loophole, ending an excise exemption worth more than $500,000 on the production of condensate.
Biggest losers are the North West Shelf joint venture partners, which have been producing the gas fields off Western Australia for the past 25 years. Condensate has been a lucrative byproduct obtained with little effort.
However the new Labor Party government reported that it will remove the oil excise exemption for condensate beginning this week. The move is expected to add $564 million (Aus.) to federal government revenue during the next financial year (2008-09) and about $2.5 billion over the next 4 years.
Condensate production from NWS fields and those onshore will be subject to the same excise rates as those applicable to all petroleum fields discovered since Sept. 18, 1975.
Under previous arrangements the first 30 million bbl of oil produced from a field was exempt from excise duty. Past production of condensate will now contribute to reaching that threshold.
Western Australia also is a loser as two thirds of the excise went to the state government under the old scheme. However the federal government said it will compensate the state for lost revenue, beginning with an initial $80 million this financial year and building to a total of $406 million over 4 years.
Not surprisingly, industry is unhappy with the change. Belinda Robinson, chief executive officer of the Australian Petroleum Production & Exploration Association, said industry was surprised by the government's move and concerned at the absence of any prior consultation.
"Given the magnitude of the investments involved and the important contribution of the petroleum industry to the Australian economy, a strong partnership between industry and government is critical," Robinson said. "Investment decisions are made on the basis of certainty that fiscal frameworks agreed with governments will underpin the long-term economic viability of projects."